Wednesday, August 29, 2012

Sirens are seductive
female creatures in Greek mythology who lured
nearby sailors with their enchanting music and voices to shipwreck on the rocky
coast of their island. The sirens are probably best known for their
part in the Odyssey where their song lured sailors to their death. Odysseus ordered his crew to plug their ears
with wax (on the advice of Circe) so as not to be lured by the Sirens' song. In
another story from Greek myth, the story of the Argonauts, Orpheus sang sweetly
enough to keep the men from succumbing to the Sirens.

There were
either two or three Sirens, who were the daughters of the sea god Phorcys or
the river god Achelous. The Seirenes were depicted as birds with either the heads,
or the entire upper bodies of women. In
mosaic art they were depicted with just bird legs.

The
IPL in many ways is proving to be the new Sirens for the people associated with
it. The IPL was conceived by Lalit Modi,
the then IPL commissioner and vice president of BCCI. The commercial success of the IPL and Modi’s
total control over the league had made him a superhero in India and the world
of cricket. In 2010, it was Modi who oversaw
the bidding process and creation for the creation of 2 new teams in the IPL. Sahara won the Pune franchise whereas Kochi was
won by a consortium of investors. A
Twitter entry by Modi declaring the stakeholders of the Kochi IPL Team
allegedly breaching confidentiality agreements led to the resignation of the
then Indian Minister of State for External Affairs Dr. Shashi Tharoor. Modi was then suspended as Chairman and
Commissioner of the IPL in April 2010. The sirens had their first victims.

On
September 19, 2011, the BCCI announced that the Kochi Tuskers Kerala IPL
franchise was terminated for breaching its terms of agreement. This meant that the 2011 IPL season was the
only season in which the Kochi team participated.

Vijay Mallya, in early 2008, paid in excess
of $100 million to buy the Bangalore franchise. At that point, his businesses were roaring and
his net worth was in excess of $1.2 billion. His liquor businesses were riding high and his
Kingfisher Airlines was the only 5 star airlines in the Indian skies and was
showing promises. Today, 4 years later, the king of good times, is
facing the worst times ever and is down to his knickers (just like the models
in his Kingfisher calendar).

Mukesh Ambani, Asia’s second richest person
in 2008 with a $43 billion fortune, paid $112 million for the Mumbai franchise
of IPL. Today Ambani’s net worth has more
than halved though he still remains the second richest Asian. Reliance Industries is no longer the darling
of the Indian stock markets and is having continuous spats with the government over
some blocks or other. His new ventures
Reliance Retail is yet to show the money.

G. M. Rao of GMR owns
the Delhi Daredevils team has seen his net worth erode with the falling stock price
of his GMR infrastructure. His fortune,
which was over $5 billion when bought IPL franchise in 2008, is now down to
less than one-fifth of that value.

T.
Venkattram Reddy, a newspaper baron and chairman of the Deccan Chronicle,
bought the Hyderabad franchise, Deccan
Chargers, $107 million in the IPL team auction in 2008. The Reddy’s are now in the middle of a
financial mess and their net worth (considering the loans and over pledging of
their shares) are in the negative.

The owners of the franchises of
Punjab and Rajasthan have had their share of ill luck with their franchises
being cancelled and then subsequently keeping their franchises through court
orders and are going through arbitration.
Film actors, who partly own these franchises, have all but finished
their career in the acting arena.

The
owners of the Kolkata franchise are perhaps are the only ones who have been
largely unaffected by the enchanting music of the sirens as they are largely
going around with their other business as smoothly as ever (apart from the
minor hiccup of Ra-One).

Subrata
Roy of the Sahara Group bought the Pune franchise for $370 million. Sahara being closely held, not much is known
about its financials, although some of his flagship deposit-taking schemes have
been banned by SEBI. Subrata Roy at one
time did threaten to pull out of the IPL though he did not do so. Roy is still in asset buying mode having
bought a couple of iconic hotels in the west.

Although
primarily none of the owners have lost heavily on their cricket teams (Kolkata
in fact is in the green), IPL seems to have uncanny similarities with the Greek
Sirens. Only time will tell how long the
owners of the Kolkata and Pune franchises can keep their ears plugged with wax and
escape the siren song.

Saturday, June 23, 2012

Senior citizen is a polite
designation for an
elderly person. The age
which qualifies for senior citizen status varies widely. In governmental parlance, it is usually
associated with an age at which people retire from jobs and pensions starts to become
available and concessions starts regarding payment of income tax and also
railway and air tickets.

In commercial contexts, where
it may serve as a marketing device to attract customers, the age is often
significantly lower (remember the 40 plus ads).

In India
senior citizen generally means people who have attained the age of 60, although
for politics 60 in India
is still considered to be very young.

The NRI (non resident
Indians) population though is waiting for the Indian Rupee to attain the senior
citizen tag, as they are savoring the 25% increase in their income just by
virtue of fall in the Indian Rupee.

Age of the county though has
no bearing on the exchange rate (just in case you are wondering why 1 USD is
not Rs 65 as my 4 year-old niece is). The
next logical question though would be why the fall and the sheer velocity.

The reasons may be manifold
but the important ones are:

Balance of payments, which
comprises trade balance (net inflow/outflow of money) and flow of capital, also
affects the value of a country's currency.
The rupee depreciation might also be driven by the trade and fiscal
deficit on one hand and weak capital flows on the other. The populist measures by the central and
state government will only make the deficit larger. The high risk of stress on the balance of
payment (BoP) front that India faces is because of the higher crude prices, and
the only way to stave off the crisis is to cut subsidies by reducing the
subsidy in fuel (diesel, kerosene and LPG) prices. A slowdown in capital inflows will increase
the pressure on the exchange rate further whereas any hasty exit by FIIs from
the Indian markets will help in INRs ageing.

Another reason might be because
a great amount of external commercial borrowings (ECBs) and foreign currency
convertible bonds (FCCBs) are maturing and hence the higher demand for INR.

Finally, exports are slowing due to European crisis.

If the European crisis
deepens, Greece exits Euro, Spain
falters or Italy
sneezes and the FII starts pulling out of Indian markets the INR might attain
the senior citizen tag pretty soon.

On the other hand if the
government changes some policies and brings in the insurance and pension sector
bills, FDI in retail and aviation, and other initiatives for FDI in India, INR
might then well get back to the late 40s pretty soon.